EOTs have become popular in construction with a string of contractors sold to their staff.

Currently business owners benefit from 100% Capital Gains Tax relief when they sell their firms via an EOT.

Reeves said that relief will now be reduced to 50% from today in a move designed to save £3.5bn over the next six years.

The move was part of a £26bn package of tax increases.

These also included a 2% hike in tax rates on dividend, property and savings income.

From April 2026 the ordinary rate of dividend tax will be increased by 2 percentage points to 10.75% and the upper rate will be increased by 2 percentage points to 35.75%. The additional rate will remain unchanged at 39.35%.

A new ‘mansion tax’ will also see an annual £2,500 charge for properties worth more than £2m and £7,500 for properties worth more than £5m .

Income tax thresholds will also be frozen until 2031 while from 1 April 2026, the National Living Wage will increase by 4.1% to £12.71 per hour.